The US records the longest working hours among the industrialized countries combined with record low levels of unemployment. A contrasting situation exists in France, where unemployment is among the highest in the European Union (11,2% of the workforce), while working time is among the shortest, in spite of a sustained growth rate. To combat unemployment, the Socialist government, which won elections in June 1997, decided to introduce by legislation a 35-hour workweek, hoping to create 500,000 jobs by 2003. This legislation, unique in Europe, raises a number of complex issues, which the present article will highlight.
France had already gone through a similar legislative exercise under the previous Conservative government, in 1996. The so-called Robien Law promoted job creation via reorganization and reduction of working time through collective bargaining. Subsidies of employers' social security contributions were included for firms who recruited low-skilled workers or refrained from dismissals. In terms of job preservation or creation this exercise proved quite successful, but the cost to the taxpayer was rather high.
The new legislative process includes two Laws. The first, so-called "Aubry Law", introduced in June 1998, was to generalize the 35-hour week to businesses employing more than 20 people by 1 January 2000, and to smaller businesses two years later. It had at triple objective (i) reviving collective bargaining at both industry and enterprise levels; (ii) promoting early implementation of working time reduction; and (iii) creating or preserving jobs, particularly blue-collar jobs. As in the 1996 Law, State subsidies for social security contributions are made available upon request to employers who negotiate with the unions or the staff the 35-hour week before it becomes mandatory, who recruit workers, particularly among the low-skilled, or who refrain from lay-offs. In non-union businesses, a staff member can be given authority to negotiate by one of the five recognized national union confederations (CFDT, CGT, CFTC, CGC, and FO) or those recognized as representative at the regional level.
The 1998 law left various important issues pending, A second law was to spell out the modalities of the implementation of the 35-hour week in the light of experience gained from industry and enterprise agreements concluded in the wake of the first law. This second proposed legislation is now before the National Assembly and is expected to become law by end December 1999. Its 17 articles are hotly debated as evidenced by the host of amendments submitted (no less than 1100). Objections or reservations are rife not only from the opposition benches but also within the "plural Left" majority parties.
The main issues at stake are as follows:
The definition of legal working time. This hinges on the difficulty to determine "effective" working time, in particular, whether it should include breaks (for changing clothes, taking a shower or eating on the premises). Starting on 1 January 2000, businesses with more than 20 employees will have to calculate working time on the basis of a maximum 35-hour week, which can be averaged throughout the year, with exceeding 1600 hours. A special subsidy is granted as an incentive to companies which have signed a plant agreement or which directly apply an industry agreement on shorter hours. Further substantial subsidies will be paid for the employers' social contributions for the low-paid workers. The law will apply to small enterprises with less than 20 employees as of January 2002.
Overtime quota and compensation. The Bill limits overtime to 130 hours per year, beyond which compensation will consist in time-off. However, this quota is reduced to a maximum of 90 hours in companies who calculate their working time on an annual basis. As an incentive, businesses which negotiate working time reduction will have a preferential lower rate for overtime in the first two years, while those without a collective agreement, will have overtime rate apply the 36th hour, and will have to pay it into a job-creation fund. The stick also applies to the workers who will not receive their overtime compensation in the first year - a unique feature!
Minimum pay. To preserve the level of earnings of low-paid staff, they will be paid 39-hour rate for 35-hours worked (an increase of 11.4%). Employers who negotiated an agreement will receive subsidies to absorb this increase in labour costs. This will also apply to new recruits in existing companies, but not to staffs in businesses created after the law has taken effect. However, to dissuade these companies from paying lower wages, they will qualify for substantially higher subsidies than those now received for the employment of the low-paid if they agree to pay the 11.4% increase. Part timers (less than 35-hours per week) will not qualify for this increase.
Part-timers. The Bill cancels the substantial subsidy granted, since 1992, to employers who recruit low-paid part-timers, because it encouraged employers to impose part-time on staff. This change is also necessary to avoid a situation where part-timers, working 34hours, doing the same jobs as full-timers, being paid lower rate.
Reduced working time for managerial and executive staff ("Cadres"). This category is difficult to define because of the heterogeneity of the occupational groups involved. The application of the law poses a problem because of their social norms of "workaholics" and their frequent identification with the company management. The Bill distinguishes between three categories of "cadres". The first, top management staff, who will be excluded from the 35-hour rule. The second, professionals, who are integrated in a team subject to a common working time schedule and to whom the 35-hour will apply (over 50% of the "cadres"). The third, executive/professional staff (sales managers, R+D people, etc.) whose working time will be calculated in days on an annual basis, limited to a maximum of 217 days (instead of 230 to 235 at present).
The law provoked the ire of the central employers' organization MEDEF, who for the first time organized a mass protest in early October against the law. They consider it archaic and counter-productive in terms of competitiveness (increase in labour costs, rigid rules on overtime, new taxes etc.) and of job-creation potential. And yet, in retrospective, the numerous industry and company agreements have given business much more flexibility in adapting to seasonal fluctuations (without overtime compensation and allowing mandatory work on weekends) and moderating or freezing pay for two years on average.
So what has been the outcome in terms of working time reduction, job creation or preservation and the promotion of collective bargaining?
Arguably, there is a secular trend towards a reduction in working time in most European economies thanks to productivity growth. The average European annual working time now stands at 1656, so the French 1600-hour limit is not the lowest. It is 1574 hours in Germany and 1374 hours in The Netherlands, where 35% of the population works part-time (the highest in the European Union). So the French exception lies in introducing it by legislation.
The 1996 and 1998 laws have created a bargaining dynamic. They met the objective of reviving social dialogue and collective bargaining: over 50% of businesses with more than 20 employees have entered negotiations. Surprisingly, some 40% of the agreements were concluded by very small firms (less than 20 employees), who will not be concerned by the legislation until 2002. This is noteworthy, with the low union density in France (below 10% of the workforce). Unions are practically absent in the bulk of small enterprises. The practice of delegating the authority to negotiate to a non-union staff member ("mandatement") has been used in 36% of the agreements.
As regards coverage, by end September 1999, 119 industry agreements at national and regional levels have been concluded, covering some 10.5 million employees That is, the majority of the private sector workforce. At enterprise level, 16,000 businesses in a broad range of sectors have so far concluded a work reduction agreement covering 2,2 million employees. This is not negligible, but leaves out the bulk of small enterprises, and hence much of the private sector workforce (representing, according to the central employers' organization estimates, 98% of businesses and 90% of the private sector workforce, respectively). A union estimate, taking also into account shift workers, who are on a 35-hour schedule since 1983, and part-timers, puts the figure of wage earners who benefit from short working time at 5.7 million.
In terms of job creation, some 290,000 jobs have been created in the private sector. This represent a year on year growth of 2.1%, almost on par with GDP growth of 2.2% (March 1998 to March 1999), this is an unprecedented performance in France. True, not all is due to the reduction in working time which contributed 123,000 new (or preserved) jobs.
The considerable cost of the subsidies towards employers' social contributions and massive early retirement measures is considered by many as exorbitant (about 110 billion French francs, or about 1 million francs per job created). Could this money have been spent more effectively?
Geneva 18 october 1999
Links: French Ministry of Labour web site: www.35hh.travail.gouv.fr/; the unions' web sites: www.cfdt.fr/; www.cgt.fr /; www.fo.fr/; the employers' web site: www.medef.fr/ and the web sites two major dailies, Libération www.liberationl.fr/ and Le Monde www.lemonde.fr.
Other BNWW articles by Hedva Sarfati:
The European job crisis and the role of labour market flexibility and social dialogue
Policy implications of the Labour Market and Social Protection Nexus
